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Canada on track to build national carbon trading marketplace

In this Feb 4, 2020 photo, the end of a cut log is seen at a Western Canadian Timber Products Ltd site near Harrison Mills, British Columbia, Canada. (JAMES MACDONALD / BLOOMBERG)

Canada is a step closer to building a nationwide marketplace to trade carbon credits as part of the Trudeau government’s bid to curb greenhouse gas emissions in the country.

The greenhouse gas price is set at US$31.60 per metric ton of emissions in 2021 and Ottawa plans to raise this to C$170 per metric ton by 2030

The federal government released draft regulations on Friday that will create a domestic market for trading carbon credits. The move will allow companies in industries such as agriculture and forestry to voluntarily reduce their emissions by earning revenue through credits. In turn, industries that need to curb their environmental impacts will be able to buy credits.

The proposed rules, unveiled by the environment department, are the latest to be proposed in Canada and come as industries are under increasing pressure to reduce climate-polluting emissions. The rules, which include strict criteria for projects, are expected to be in place in the later part of this year.

Eligible projects will be able to generate credits, also known as greenhouse gas offsets, with 1 metric ton of carbon dioxide reduced being worth one credit that can be sold to a buyer, according to materials from the federal government. This is a way for buyers to offset their own greenhouse gas emissions. Projects must meet Canada’s eligibility criteria in order to generate credits that must be quantifiable, verifiable and permanent.

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The regulations will include a tracking and verification system that will be shared through a public registry, and the proposed system won’t replace existing provincial offset rules, like those in British Columbia and Alberta.

The price of offset credits will be determined by supply and demand, but the price of the compliance obligations under the pricing system, set each year by Environment and Climate Change Canada, will serve as a ceiling in that marketplace, a department official speaking on background at a technical briefing said Friday.

Starting in 2022, companies using the pricing system must meet 25 percent of their obligations using emission credits from that system, while 75 percent can come from the proposed offset credits or other recognized units, the official said.

The greenhouse gas price is set at C$40 (US$31.60) per metric ton of emissions in 2021 and Ottawa plans to raise this to C$170 per metric ton by 2030.

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